Question

Question 1 (1 point)

[Question 1 Unsaved]
One reason that people hold money is to try to profit from changes in the prices of financial assets like stocks and bonds. This motive for holding money is called

Question 1 options:

A) transactions demand.
B) precautionary demand.
C) speculative demand.
D) foreign-exchange demand.

Question 2 (1 point)

[Question 2 Unsaved]
Which of the following causes the demand for money curve to slope downward?

Question 2 options:

A) Transactions demand.
B) Precautionary demand.
C) Speculative demand.
D) Foreign-exchange demand.

Question 3 (1 point)

[Question 3 Unsaved]

Which of the following policies could the Fed use to increase the supply of money from MS1 to MS2 as shown in the diagram?

Question 3 options:

A)

A tax cut.

B)

Buying government securities.

C)

Raising the discount rate.

D)

Raising the required reserve ratio.

Question 4 (1 point)

[Question 4 Unsaved]

As the money market equilibrium adjusts from from E1 to E2, individuals and businesses will be trying to

Question 4 options:

A)

borrow additional funds.

B)

reduce their capital investments.

C)

reduce precautionary holdings.

D)

purchase bonds.

Question 5 (1 point)

[Question 5 Unsaved]
If there is a fall in the price of bonds, then there must also be a rise in

Question 5 options:

A) interest rates.
B) stock prices.
C) money supply.
D) money demand.

Question 6 (1 point)

[Question 6 Unsaved]
According to Keynesian economists, which of the following is not a consequence of increasing the money supply?

Question 6 options:

A) Lower interest rate.
B) Greater investment.
C) Increase stability in the velocity of money.
D) Higher real GDP.

Question 7 (1 point)

[Question 7 Unsaved]
According to the quantity theory of money, a 10 percent increase in the money supply leads to a 10 percent increase in

Question 7 options:

A) unemployment.
B) velocity.
C) real GDP.
D) the price level.

Question 8 (1 point)

[Question 8 Unsaved]
Milton Friedman is an advocate for which of the following policy recommendations?

Question 8 options:

A) Active fiscal policy to close recessionary and inflationary gaps.
B) Rapid expansion of the money supply during times of recession.
C) Frequent adjustments in the money supply to maintain a stable interest rate.
D) Constant money supply growth regardless of economic conditions.

Question 9 (1 point)

[Question 9 Unsaved]
Which economic theory argues that changes in velocity are predictable and the crowding-out effect is substantial?

Question 9 options:

A) Classical theory.
B) Keynesian theory.
C) Monetarist theory.
D) Marxist theory.

Question 10 (1 point)

[Question 10 Unsaved]
Some economists argue that the crowding-out effect is insignificant because investment demand is relatively insensitive to changes in the interest rate. Which theory tends to promote this viewpoint?

Question 10 options:

A) Classical theory.
B) Keynesian theory.
C) Monetarist theory.
D) Marxist theory.

Answer 1

Ans:

1) Option C

speculative demand.

Speculative demand for money is when people hold money inorder to create profit from changes in the prices of financial assets like stocks and bonds.

2) Option C

speculative demand

This is because money demand and interest rates are inversely related.hence a decrease in the interest rates will increase the demand for money and a increase in the interest rates will decrease the demand for money, thereby causing the demand for money curve to slope downwar?d.